MISSOURI CORP. ..... manufactures widgets. The materials used for the widgets are inexpensive, but the process is very labor intensive. The supervisor decided to use cheaper labor this period to see whether costs could be reduced. You have been asked to prepare a report about how effective operations had been during the month of October. The following standards have been established in connection with the production of one widget (standard costs per unit): Cost per 3 lbs. @ 5 hrs @ $12 per lb. $15 per hr unit $36 $75 Direct materials Direct labor Factory overhead: Variable Fixed $3 per direct labor hr $4 per direct labor hr ($20 per unit)) $15 $20 $146 Overhead (fixed and variable) is applied on the basis of direct labor hours. Estimated production for the month was 8,000 widgets, or 40,000 labor hours. During October, the company actually produced 7,800 widgets and the records showed the following: Direct materials purchased 23,100 lbs @ $12.60 Direct materials used 23,100 lbs @ Direct labor 40,100 hours @ $14.60 Variable overhead $119,000 Fixed overhead $180,000 Note: The quantity purchased was exactly equal to the quantity used. The company's policy is to record direct materials price variances at the time the materials are purchased. REQUIRED: 9. NOW ASSUME that the company has chosen to use a standard costing system to record all inventory at standard, show the entries needed (written AND T-accounts) as follows: d) Record the usage of direct labor in production and the direct labor rate and efficiency variances. e) Record payment of direct labor. f) Dispose of the rate and efficiency variances. 10. Interpret each of the labor variances. Give at least 2 possible causes for each, and indicate what person (s) would be primarily responsible 11. Prepare a simple and meaningful performance report (variance report) for direct materials which explains the flexible budget variance (standard cost variance) above. (A picture would be just fine) For class, if time allows: (certainly, feel free to look this over, do the reading and try it for class) 12. Compute the variable overhead spending and efficiency variances. a) Journalize the actual incurring of variable overhead and variable overhead variances. b) Apply variable overhead c) Record variances and close 13. Compute the fixed overhead spending and volume variances. a) Journalize the actual incurring of fixed overhead and fixed overhead variances. b) Apply fixed overhead c) Record variances and close